It’s that time of year again, and no, I’m not talking about the holidays. It’s that magical time when the City Comptroller announces the annual interest rate. Pursuant to the Chicago Residential Landlord and Tenant Ordinance (CRLTO), a landlord is obligated to pay interest on monies held (for six months or more) to the tenant within 30 days after the end of each 12-month rental period by cash or credit to be applied to the rent due.

The City Comptroller has set the annual interest rate for 2016 at .01%.

This amount is the same rate as the 2015 rate of .01%.  This interest rate is minimal, but the failure to pay tenants the interest earned can make a large impact on the books, every landlord should be aware of the potential penalties.

The security deposit interest can be paid to the tenant or the interest can be given as a credit to the rental account. For instance, if a landlord takes a security deposit for $1,000.00 at the beginning of this year, the landlord will owe $0.10 in interest to the tenant by the end of the 12 month lease term. But if the landlord fails to pay the small interest earned, the landlord could be on the hook for not only the return of the security deposit but for damages equal to two times the deposit plus interest, attorney fees, and court costs. Suddenly, the security deposit doesn’t seem worth requiring in the first place.

It is imperative for all landlords to remember that the money issued as the security deposit still belongs to the tenant. The landlord is only “holding” the money “in case” of potential damages. Therefore, the money that belongs to another is kept in a separate accounts and the interest earned belongs back to the rightful party.

We’re not suggesting that security deposits should be required. We are merely reminding landlords to abide by the rules of the CRLTO. Also remember, if you are renewing a lease, make sure to attach the current copy of the Security Deposit Summary with each lease and lease renewal. If a landlord fails to attach a copy of the Summary, the landlord may again be on the hook for not only a fine for violation of the CRLTO, but also attorney fees and court costs.

If you have questions about a landlord’s legal requirements or the Chicago Residential Landlord and Tenant Ordinance (CRLTO), our experienced attorneys are available. Call Kovitz Shifrin Nesbit toll-free at 855-537-0500 or visit us online at www.ksnlaw.com.

You can view the City of Chicago website with security deposit interest rates here.

Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.

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